COVID-19: Biggest jump in companies facing “significant financial distress” since 2014 | Economic news
A closely watched report noted the biggest quarterly jump in the number of companies suffering significant financial difficulties since 2014 after a year of coronavirus-related disruption.
The latest red flag alert produced by insolvency specialists Begbies Traynor measured a jump of 93,000 businesses in the first quarter of 2021, a period that took the anniversary of the UK’s first COVID-19[feminine] confinement last March.
This meant that 723,000 businesses suffered in total, according to the report, a 42% increase on last year.
The quarterly rise was attributed to the latest forced shutdowns of parts of the economy deemed non-essential as UK national governments sought to curb the spread of the virus and protect citizens through the rollout of vaccination.
Begbies Traynor said companies in the logistics and real estate sectors saw a particularly sharp increase in difficulties in the first three months of 2021.
He warned that easing lockdowns may not be able to prevent many struggling businesses from sliding into insolvency.
Latest figures from the Insolvency Service showed 992 businesses in England and Wales were declared insolvent in March – an increase on the start of the year but still a 20% drop on March 2020.
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Data for Scottish and Northern Irish businesses show a similar picture.
Julie Palmer, a partner at Begbies Traynor, urged those in trouble to seek help without delay.
She said: “The barrage of zombie businesses might be about to break.
“Opening the doors to consumer-facing businesses on April 12 may well seem like a big step in the right direction for many of these businesses as they try to shake off the traumatic exchanges of the past 12 months.
“However, our experience shows that unmanageable levels of debt and the resulting excessive transactions are likely the hidden icebergs waiting to sink even the most high-profile businesses.
“Companies that were profitable before the pandemic, have manageable debt and are still relevant in the post-pandemic world could thrive and be the real winners in this climate.
“They need guidance and need to act quickly. In a rapidly changing market, procrastinating businesses will be swept away by the force of distress that is making its way across the UK.”